The Gambia - Overview of economy

The Gambia's economy is closely tied to its command of the Gambia
river system, which gives it considerable potential in trade, depending
on the level of development in the hinterland. At present, it is an
economically disadvantaged country, hampered by its small size,
geographical and climatic difficulties, lack of mineral or other natural
resources, and rudimentary
infrastructure
. The economy is driven by agriculture (especially groundnut production)
and tourism. Agriculture production suffered during the droughts of the
last 2 decades, although the Gambia is less vulnerable than its Sahel (a
semi-arid region just south of the Sahara desert) neighbors.

Tourism is the most important source of foreign exchange revenue. It
suffered in the wake of an abortive coup in 1981 and again after the
successful coup of 1994. It has since recovered and in 1996 and 1998 the
number of tourist arrivals had overtaken pre-coup levels.

Foreign aid has been key to the development of infrastructure as well as
general budgetary support. An economic recovery program, launched in
August 1985, later renamed the Programme for Sustained Development,
introduced austerity measures which controlled
inflation
and produced significant
real GDP
growth in the latter

part of the 1980s. Real GDP grew at 3.6 percent annually between 1980
and 1990 and 2.2 percent annually between 1990 and 1997. The economy
grew in real terms by 5.3 percent in 1996, 4.9 percent in 1997, and 4.7
percent in 1998. The Gambia has continued to implement market-oriented
reforms which won it praise from the International Monetary Fund (IMF)
in 1992, and its policies have been broadly continued by the post-1994
government.

The Gambian economy is strongly affected by the health of CFA franc
because of its close relationship with Senegal. The Gambia has enjoyed a
successful
re-export
trade, and the success of Banjul port has been the result of its
ability to undercut the port charges of Dakar in Senegal . When the CFA
franc was devalued by 50 percent in 1994, the position changed abruptly,
affecting the Gambia-Senegal cross-border trade in groundnuts. Nuts
grown in the Gambia were sold in Senegal because of the higher prices
there, with Gambia losing on the processing and shipping revenues.

The Gambia had US$37.8 million of international debt in 1998, and this
was 9.1 percent of GDP, and US$31 per head.
Debt service
took up 9.7 percent of the export earnings on goods and services. The
levels of debt in relation to GDP and per person are significantly
higher than the African average, but the debt servicing requirement from
export earnings is lower.